Government issues guidelines to regulate direct selling companies

September 14, 2016 — INDOLINK Consulting (es)

Source: The Economic Times, Sept 13, 2016

NEW DELHI: The government has issued guidelines to regulate direct selling companies such as Amway, Oriflame, Avon and Tupperware, with clear provisions to protect consumers and forbid firms from exaggerating the benefits of products or charging a fee from their agents.

Direct selling companies applauded the consumer affairs ministry for the guidelines, which industry executives said would weed out fraudulent players, help serious companies grow, protect consumers and disallow ecommerce platforms from offering their products without consent.

The Centre has asked the states to implement the guidelines for companies involved in direct sales to customers, bypassing retail stores.
“We have sent an advisory to state governments on the model framework for guidelines on direct selling after consultation with industry and stakeholders. Some states have already made their guidelines and can make changes locally,” said Hem Pande, secretary in the Department of Consumer Affairs.

“The state governments will also set up a mechanism to monitor/supervise the activities of direct sellers, direct selling entity regarding compliance of the guidelines,” the consumer affairs ministry said in a note dated September 9.

Pande said currently, direct selling had no guidelines. “Some companies took fees from members, others didn’t. If we get a good response, then we may come with a regulation. As of now, it will be voluntary. To promote and grow direct selling, we need guidelines,” he said. The guidelines seek to protect consumers and sales agents and bar ecommerce platforms from offering products or services of direct sales companies without their written consent. The guidelines say agreements between a company in this business and its agents should comply with provisions of the Indian Contract Act, 1872, and agents should not be asked or induced to buy more products that what can be expected to be sold to consumers. Further, agents should be allowed to withdraw their participation and get a refund for goods and services.

A recent report by Ficci-KPMG showcased the potential for direct selling in India, projecting potential growth of more than 800 per cent for the industry — reaching a volume of Rs 64,500 crore by 2025, up from the current Rs 8,000 crore. Amit Chadha, secretary general of the Indian Direct Selling Association, said the sector has the potential to reach Rs 15,000 crore by 2019-20. The association comprising 14 members said the guidelines would encourage the industry.

“In the absence of proper policy or guidelines, numerous fraudulent players have been taking advantage of the situation. Now that the guidelines are out, it shall address the current concerns of the industry and provide much-needed impetus,” said Chadha.

Amway, which has invested more than Rs 600 crore and sells more than 130 daily-use products, welcomed the guidelines. “We, along with others in the industry, plan to continue to engage with the central government in pursuit of appropriate regulations for the direct selling industry. The industry provides part-time employment opportunity to hundreds of thousands of direct sellers as well as alternate career path to those who opt for it,” Amway India CEO Anshu Budhraja said.

According to Jitendra Jagota, chairman of IDSA, the draft guidelines were formulated after several rounds of meetings by an inter-ministerial committee. The committee comprised of representatives from the corporate affairs and finance ministries, Department of Industrial Policy & Promotion, Department of Revenue, Department of Information Technology and Department of Law, along with the chief secretaries of Andhra Pradesh, Kerala and Delhi. Interactions took place with industry stakeholders and trade bodies.